If you have already determined that a home equity loan is in your best interest, make sure you ask yourself these important questions before you sign.
What is the interest rate, and will it change over the term of the loan? If it is a fixed-rate loan, the interest will stay the same for the entirety of the loan. If it is an adjustable-rate loan, the interest rate will be adjusted periodically according to general interest rates. Make sure you find out if there is a cap on the rate if it does adjust.
What is the term of the loan? This will tell you how long you have to repay your loan.
What will my monthly payment be? Without this figure, it will be impossible for you to make a manageable monthly budget with room for your expenses like utilities, groceries and other bills.
Will there be a lump sum payment due at the end of the term? Knowing this can help you prepare your finances for writing a large check when the loan is over.
Is there a penalty if I pay off the loan before the end of the term? Some lenders will charge you a fee if you pay off your loan before the term is over.
What are the fees associated with the loan and what is their estimated total? You will probably be expected to pay some fees associated with processing your information and closing the loan. Ask you lender how much you will be expected to pay so you can make sure you can afford the expenses.
Under what circumstances can you call the loan? If you fail to make payments, some lenders will demand that you pay off the loan early.
What documentation do I need to provide? You will probably need to submit some information about your employment history, as well as your assets and other debts.
When will I receive the funds? It may take a while to process your information, so your loan may not be available immediately.